Macro and Politics

* The Residential Property Price Index (RPPI) rose by 1.4% m/m and 32.9% y/y in April, reaching a level of 176.4. Yet, in real terms, the index posted an annual decline of 3.6%. Although the annual real depreciation in housing prices has persisted since February 2024, the pace of this depreciation has been moderating since October. Notably, the 3.6% year-on-year decline recorded in April marks the smallest real loss in value observed since February 2024. The y/y increase in mortgaged home sales appears to have been driven by expectations of further price appreciation, despite mortgage rates remaining elevated at around 40%. These expectations are likely supported by the recent stabilization in real house price depreciation, following an extended period of real term weakening. This trend in both mortgage-backed sales and house prices continued in April as well.

* The short-term external debt stock in March materialized at USD172.7bn, down by a mere 0.2% m/m. In terms of short-term debt statistics, we believe that “debt stock on a remaining maturity basis,” calculated based on the external debt maturing within 1 year or less regarding the original maturity, is rather critical, which is at USD224.8bn as of March 2025. Of this total, USD18.6bn is attributed to loans taken by resident banks and private sector affiliates from their branches and affiliates abroad. Stripping this amount from the total results in USD206.2bn. We also add 12-month forward-looking CAD expectations on this amount so as to reach Turkey’s annual external financing need (EFN).  Accordingly, we calculate EFN as of March 2025 around USD232bn.

* The consumer confidence index ameliorated by 1.1% to 84.8 level in May. Please recall that the index slumped by 2.3% to 83.9 level in April, mainly on the back rising idiosyncratic concerns. As of May, a renewed upward trend is evident, accompanied by a notable improvement in consumer sentiment. It is important to underscore that the consumer confidence index—which ranges from 0 to 200—signals pessimism when it falls below 100, and optimism when it exceeds that threshold. As per the sub-categories of the May data: The index related to the financial situation of households at present remained unchanged at 69.1, while the financial situation expectation of household over the next 12-month increased by 1.2% to 85.3 level. Moreover, the general economic situation expectation index over the next 12-month period edged down by 0.7% to 82.2, while the sub-index related to the assessment on spending money on durable goods over the next 12 months compared to the past 12-month period, which is an important leading indicator in terms of domestic demand, climbed by 3.3% to 102.5. The May data suggest that the deterioration in expectations regarding the general economic outlook over the next 12 months may have contributed to an increased propensity to consume, potentially playing a role in the rise observed in the index measuring intentions to spend on durable goods.